Monday, June 12, 2006

One of the really great things about going to a great college is that I made friends with some really smart people. Every once in awhile I read something that makes me realize just how smart some of my friends are. That happened today while reading an article on The Motley Fool called How Google Is Killing the Internet.

The article talks about how AdSense "fake sites" are being setup in droves. These sites show up on searches, have either no content of their own or its copied from somewhere else (like Amazon) but they have AdSense ads all over the site. All it takes is a click on one of those ads and they make money. It's annoying, no doubt about it. But does it mark the end of the internet, or is it just another wrinkle in the ever-evolving complexities of the strain of unstructured search known as web search?

Whatever. These sites do provide the stepping stone to some actual insight by the author. The real threat out there is click fraud, not the bogus AdSense sites. This is the ultimate threat for Google, though I'm not sure if that makes it the ultimate threat to the internet (or if it makes a threat to the internet at all.) The author then claims that click fraud is a big problem, much bigger than Google admits. He claims that they don't care about doing anything about it because they are still making money, and that their virtual monopoly (60% market share) on search gives people little choice but to live with the click fraud. He then goes on to claim that is why Google is busting out with so many other offerings, since they know that the AdWords/AdSense money machine is going to fall apart one day because of click fraud. He then points to insider sell-off of Google stock as further evidence that its management sees the end coming.

This is where I realize how smart some of my friends are. The guy writing this article, Seth Jayson, is probably supposed to know a lot about Google. He's probably very technology/internet savvy, and has a nice education. Making this kind of analysis and writing about it is what he does for a living. The article in question is a nice piece of analysis, and makes a lot of sense. It's totally wrong though, and I know this just because of a conversation I had with my friend Terry a couple of weeks ago.

We were talking about Google as well. I don't remember how it came up. Click fraud is indeed the ultimate threat to Google. Offline advertising hurting. DVRs are killing TV ads. Print ads in newspapers and magazines suffer because people would rather get their information online. Radio ads are hurting because people are listening either to their iPod or satellite radio instead. Online ads are the way to go, yet they are suffering too. Unsolicited ads are being stymied by pop-up blockers and spam filters. But targeted ads, as executed by Google, or thriving. Widespread click fraud would crush that. Monopoly or not, people are not going to pay for ineffective advertising.

That's where all the other Google apps come in. Why offer GMail? It does provide more advertising opportunities, but what it does even better is force you to login to Google. It verifies identity. If your identity is verified, it cannot be used for click fraud. Any clicks you make are legit, no fraud. Imagine if Google made you login with an encrypted password whenever you clicked an ad. That would have the same effect as having you login to GMail. Or Blogger. Or Google Pages. Or the new Google Spreadsheet. Or if you use the Google Browser Sync on Firefox. All of these services force you to verify your identity and thus make your clicks certifiable and golden. Take that click fraud.

This was the insight of my friend Terry. This is a level of insight that Mr. Seth Jayson does not posses, even though he's probably a lot more time and effort into thinking about Google and click fraud than my friend Terry has. Yet Jayson's analysis misses the most crucial part of Google's strategy.